AMD Buys SeaMicro in a Bid to Capture Clouds

AMD is acquiring server maker SeaMicro for $334 million, $281 million of which will be paid out in cash from existing reserves.

SeaMicro specializes in packing hundreds of low-power processors into systems that deliver the same Web serving performance of conventional server chips at a fraction of the electrical draw. The startup's servers can be found in the data centers of organizations like Google and Mozilla.

SeaMicro is one of a handful of companies like Calxeda using non-traditional server architectures and energy-sipping processors to help cloud providers lower their power and cooling requirements. Data center efficiency has taken on added significance in recent years as IT facilities scale up their infrastructures to meet the demand for cloud services.

Road to the Data Center, Paved by Intel

With SeaMicro in tow, the embattled chip company is setting its sights on the white-hot cloud data center market, and AMD will need to blaze new trails in the marketplace to help turn its fortunes around.

The company's revenues have flatlined year-over-year, and last quarter it suffered a loss of $177 million. For the current quarter, AMD expects a revenue drop of 8 percent, give or take 3 percentage points.

In the midst of all this dealmaking, AMD finds itself in a competitive conundrum.

SeaMicro uses Atom and Xeon chips from Intel. So in the short term, at least, AMD will be selling and supporting hardware based, in part, on technology from the rival chipmaker. For now, AMD will be working on integrating SeaMicro technology into its own product roadmap.

In a company statement, AMD's president and CEO, Rory Read, laid bare his company's market strategy for the newly acquired tech. "The unmatched combination of AMD's processing capabilities, SeaMicro's system and fabric technology, and our ambidextrous technology approach uniquely positions AMD with a compelling, differentiated position to attack the fastest growing segment of the server market," he states.

AMD has no intention of entering the systems business, according to John Fruehe, the company’s director of marketing for Server, Embedded and FireStream products. That work is best left to OEMs like Dell and HP.

"When you look at the IP that AMD has at its disposal, large cores like 'Bulldozer' and the upcoming 'Piledriver'; smaller, energy efficient cores like 'Bobcat' and the upcoming 'Jaguar'; as well as leading GPU technology, it all means that we have the ability to build a variety of CPU and APU products that can be integrated into servers," writes Fruehe.

"And the unique fabric solution from SeaMicro helps AMD tie all of these pieces together."

Pedro Hernandez is a contributor to the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the Internet.com network of IT-related websites and as the Green IT curator for GigaOM Pro. Follow him on Twitter @ecoINSITE.